Not all of us are thinking about our retirement right now. The priority is to survive and live as well as we can with the finances we have now. But are we making a mistake by lacking a focus on the distant future too? After all, who wants to have any debts to worry about when they’re trying to survive on a pension.
The sooner you start saving for a pension or retirement income, the more you should be able to receive. But if you’re desperately trying to make ends meet today, how on earth can you be putting anything aside for tomorrow? What you need is a plan that can resolve today’s difficulties and then continue to help you provide for your own and your family’s future.
When you draw up a detailed plan of action, you can see where your money is going, and how much you need to clear existing debts. It’s important to consider all your options for retirement as well. Many pensions advisors ask you about the salary you’re on today. This can often provide the basis for any future plans and investments. A percentage of your current wage is expected to be a comfortable level of income in the future. Until you’re debt-free, this seems unlikely to be enough.
Start looking at your workplace pension. Are you able to top it up by contributing a percent or two more? In many cases, your employer will match that additional contribution. Next, consider the safe retirement investments that you might be eligible for. Finally, add up all the forecasts you can expect, including any state benefits or pension you might be eligible. This could be your income once you have finished working.
Now you have a detailed plan leading from where you are today all the way to a comfortable retirement. It should show you the steps you need to take on the journey to clearing current financial obligations. Many advisors suggest that saving while you are in debt is not a good idea. You should instead focus on clearing the debts. This is good advice, but saving for your pension pot and retirement shouldn’t be sacrificed.
So what is your plan now? Ideally, you will have already pulled out all your credit agreements and listed the amounts you still owe. What are the monthly repayments you are committed to? Make a third column for the interest rates you’re being charged. Now check the small print for each contract. Can you repay the outstanding amount today without further financial penalty? If this reduces the total amount repayable, then this could be worth considering. If you don’t have savings to cover that total cost, then see if you can refinance to reduce the total sum repayable.
Smart spending habits can help you to avoid borrowing more. If your salary is lower than your spending, then something needs to change in your lifestyle. And if you’re not planning for your retirement, then make some moves toward it now. Can you move toward a debt-free retirement?